Senate committee hears pros and cons at Thursday hearing

File- In this Jan. 28, 2010 photo, a step-up transformer converts 26,000 volts of electricity to 765,000 volts for distribution to the Rockport plant.

INDIANAPOLIS - The Indiana Court of Appeals on Thursday declined to conduct a more detailed review of the nearly $3 billion coal-to-gas plant proposed to be built at Rockport, Ind. The court's decision came as the project's developers defended it in a hearing before a state Senate committee.

The developments guarantee the two-track battle over the Indiana Finance Authority's unusual 30-year contract to buy the plant's synthetic gas product at a fixed rate and then resell it on the open market will continue — with no final resolution in sight.

As the legislative battle continues, the legal one could shift to the state Supreme Court now as a result of the appellate court's decision to turn down a request by a group of gas companies and environmental organizations' to redo the Indiana Utility Regulatory Committee's review of the contract.

"That's certainly going to be considered," said Mike Roeder, vice president of government affairs and communications for Evansville-based Vectren Corp., which is leading the legal and lobbying efforts against the plant.

"They will now launch a desperate appeal to the Supreme Court, waiting until the last minute, where they will lose again," Lubbers said. "They can't win on the merits, so Vectren is trying to pressure our legislators into submission with a high-profile media campaign and an army of lobbyists."

That campaign — including full-page advertisements in newspapers across Indiana this week — is focused on a bill that was the subject of a Thursday morning state Senate Utility Committee hearing.

There, Lubbers and other developers of the Rockport plant argued that Indiana needs a more diverse energy portfolio — and that the state's contract with a company that will convert coal to synthetic natural gas would accomplish just that.

The 30-year deal would tie 17 percent of Hoosier gas users' bills to the Rockport plant's rate. Opponents point to a nationwide shale gas boom and say they expect natural gas to sell for an amount cheaper than that in the coming decades.

Lubbers said that's shortsighted. He said natural gas rates are historically volatile, so Indiana ought to lean in part on more stable coal prices.

"The great trick that's being played on us as we try to evaluate this contract is focusing all the attention on the 17 eggs that we took out of the 100-egg basket," Lubbers said.

"It's a completely inappropriate way to evaluate the economics of this deal. The point is, you're diversifying the portfolio, and so what you need to do is consider the economics of the entire portfolio."

He underscored the 30-year contract's requirement that at its end, if ratepayers haven't saved money as a result of the plant's rates, its owners would have to reimburse ratepayers or turn the plant over to the state.

"It's not just a promise. It's backed by hard assets," Lubbers said. "We have made a bet — we will lose our company if we're wrong."

Thursday's committee hearing was over a bill by Sen. Doug Eckerty, R-Yorktown. It would require ratepayers to be reimbursed every three years if the Rockport plant's rates top natural gas prices on the open market.

That would kill the deal entirely, Leucadia officials have said.

"A large coal project is not financeable without a long-term, assured revenue stream. That's not something that we can take to market," said Dan Maley, Leucadia's vice president.

Opponents of the project said that'd be fine with them.

"It's not the role of the state to subsidize the cash flow of a company or to attempt to hedge the commodity price," said Patrick Bennett, the Indiana Manufacturers Association's vice president of environment, energy and infrastructure.

"This project should stand on its own within the current economic development, like the state does with other companies."

Bob Kraft, the Indiana Farm Bureau's director of state government relations, said the deal could hurt farmers now — and they'd find little solace in 30 years, when many of them will have handed their property off to relatives or other buyers.

"Chances are good that in the first few years in particular, the ratepayers will be asked to underwrite the cost of the project through the rates," Kraft said.

"That being the case," he said, "our members who have access to natural gas are going to wind up paying a larger, higher rate and not receive any kind of reconciliation until the end of the 30-year period" unless Eckerty's bill is approved.

Senate Bill 510 is likely to change. Legislative leaders have said they'd like the Indiana Utility Regulatory Commission to take another look at the project.

Senate Utility Committee Chairman Jim Merritt, R-Indianapolis, said he plans to offer an amendment and vote on whether to advance the bill on to the full chamber at its meeting next week.